E-Marketplaces: Midsize, small companies expected to take plunge

Large corporations may have been the first to clamber onto the e-marketplace bandwagon, but the next 12 to 24 months will see more midsize and small companies jumping on board, according to AMR Research Inc.

During the next year, 40% of small companies (less than 2,500 employees) surveyed said they plan to participate in an online exchange, compared with 19% already involved, said Joan Harbin, research director at the Boston-based firm.

Among midsize companies (2,500 to 10,000 employees), 38% of those surveyed said they expect to join an e-marketplace in the coming year, compared with 21% that began participating in 2000. The survey results are based on interviews with 257 companies in all industries.

While larger organizations jumped in early to help leverage the use of exchanges' technology and drive efficiencies in their supply chains, smaller companies will be able to sharpen their competitive edge by joining a public exchange or setting up a private one, Harbin said during a recent seminar sponsored by software vendor IPNet Solutions Inc., Newport Beach, Calif.

"The playing field is leveled for the smaller organizations participating in an exchange," she said. "Smaller companies will be able to gain new customers and enter new markets."

The reasons for joining exchanges vary slightly depending on the size of a company, Harbin pointed out.

Large companies have been primarily concerned with building both their customer and supplier activities through e-marketplaces, while midsize companies see their customer applications as the major objective.

Smaller companies appear to be split between concentrating equally on supplier and customer aspects of their businesses and focusing mainly on improving supplier relationships.

But regardless of size, companies believe online exchanges' real value lies in collaboration, which many e-marketplaces are trying to put in place now that auction services are no longer the most influential factor in deciding whether to join an exchange.

"Auctions and news content were the easiest things to set up, and that's why they were done first," Harbin said. "Things like sourcing and collaboration are much harder to do and are emerging in exchange models today.

"As companies move away from experimenting with the kinds of exchanges they participate in, they're going to look for something that'll help them run critical parts of the business," she said. "News services and auctions will no longer be the compelling reasons to join exchanges."

Among the top collaboration priorities expected to surface are services relevant to contract management, sourcing capabilities, and supply-chain optimization, Harbin said.

But as those services come online, other areas are still quite important to users.

High on that list is an exchange's ability to conduct thorough product and catalog searches and provide order tracking information and buyer and seller back-end integration, Harbin said.